Source: Dow Jones Newswires                    Date: 15 June, 2011

The continuing negotiations between the Mongolian Government and various bidders seeking to operate the huge Tavan Tolgoi coal mine have hit a roadblock after reaching an advanced stage, with issues surrounding infrastructure facilities defying resolution. "They are taking into account all different implications of the mine and related infrastructure and related political issues," a person familiar with the situation has said. The talks have also involved engaging with the governments of China, Russia, Japan and South Korea.

"I believe the talks [with the bidders] are in pretty advanced stages," the person said, but declined to give an exact timeframe as to when a final bidder would be selected. The person said that the Mongolian government has already initiated some work toward the development of railway lines linked to the project, enhancing its ability to tap various export markets.

"The railway that will be put first will link it [Tavan Tolgoi mine] to Russian ports so that they can target markets such as Korea and Japan and even further in the future," the person said. "The government decided to first build a railway connecting to a new port so that they can diversify and mitigate the risks associated with having a single target destination, which is currently China."

As part of a specific time-table associated with infrastructure developments for the Tavan Tolgoi project, the person said that the Mongolian government is planning to have a direct railway line from South Gobi to China by 2015 and also looking to connect South Gobi to North East of Russia.

The person said even as the Mongolian government has plans for an initial public offering of Erdenes-Tavan Tolgoi, but the offering may happen only once the company becomes "operational". "They are looking to find the right formula to maximize the value," the person said.